OMG – It’s a LDO!

Hey look, a new acronym – this time LDO – which stands for Lean Digital Operator. At the recent ETIS gathering in Riga, Telecom Italia’s strategy director outlined the future business drivers for operators and their IT implications, and how this will force operator to be lean, and, you guessed it, digital. Which basically means running a tighter ship and selling a wider range of services. But getting there will require a transformation of an operator’s cost base and also a flexible innovative approach to acquire revenue from new digital services.

Firstly, the lean piece. The total cost of ownership of networks and IT needs to come down – a 20% reduction was quoted in the presentation. There are many components that can be made leaner to reduce this cost, and these include reducing network opex, and having a simplified and flexible approach to IT. This includes IT transformation using cloud and NFV, and SDN support for networks.

And for the digital part. The service evolution involves operators increasing their offers to market an increasingly wide range of offers including services for M2M and internet of things, smart environments, cloud services, digital media, big data and personal data, digital identity and security services. According to Telecom Italia in order to succeed with the wide range of new digital services operators need to do two things:

  1. Leverage their distinctive assets – this includes local presence, SIM and authentication, billing and CRM, and QOS, QOE features.
  2. Adopt internet service thinking and processes – including being open to flexible partnerships, using net and cloud APIs, offer products with embedded connectivity and leverage customer and network data.

It’s interesting to see billing and QoS, QoE features listed as assets that can be used to enable telcos offer a wider range of digital services. This is already starting to happen with speed being the foundation that operators are building offers on for LTE services. But billing and BSS cannot sit still in this new lean and digital age. It may be an asset, but it needs to change to keep pace. It was said that OSS and BSS needs to be transformed away from a ‘spaghetti’ architecture to a much more simpler model that leverages SOA (service orientated architecture) and cloud, use agile methodologies to enabler faster delivery of project and is built on real-time processes.

A very interesting comparison between OTT and telcos was made during the presentation. A selection of large OTT players (Google, Facebook and Yahoo) was compared with some of the leading telcos (Telecom Italia, DT, BT, Vodafone, AT&T). While the OTTs had revenues of 10% of the telcos, capex of 6% and just 6% of the employees of the sample large telcos, the market capitalization figure was 52%. That is the despite comparative revenues of $47bn for the OTT against $460bn for the telcos, the market capitalization figures were $270bn for the OTTs and $521bn for the telcos.

Telcos are not OTTs and OTTs are not telcos. For telcos it was said that they need to remain telcos but nurture OTTs. And at the heart of this is a transformation to become lean and digital operators (or even LDOs in case we’re suffering from acronym withdrawal).

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About Martin Morgan 13 Articles
With 25 years’ experience in mobile communications software, Martin has worked in mobile billing software since the early days of the industry. As such he’s been around long enough to have had numerous articles published. He has spoken at many conferences. He’s served on the boards of software companies and trade associations. At Openet Martin is responsible for marketing thought leadership and demand creation.

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